April 27, 2022

Alert

Nasdaq Publishes Guidance on Board Diversity Matrix Reporting

Download

DOWNLOAD A PDF OF THIS REPORT pdf(0.1MB)

Contact

Margaret Engel
Founding Partner [email protected] 212-921-9353
Louisa Heywood
Analyst [email protected] 646-568-1160

Share

With new board diversity disclosure rules becoming effective August 8, 2022, Nasdaq has released guidance on acceptable formats to meet the new diversity reporting requirements.

Background

In August 2021, the SEC approved Nasdaq’s proposed new listing rules effected to enhance transparency and disclosure of board diversity statistics. The move by Nasdaq reflects regulation at the state level and requirements from institutional investors and investment banks like Goldman Sachs.

Nasdaq’s Final Rules require most Nasdaq-listed companies to annually disclose information on the gender and racial/ethnic characteristics represented on the board in a prescribed format, and to meet or make progress towards an acceptable diversity standard. The Final Rules require most companies to:

  1. have at least two self-identified “Diverse” members of the board of directors; or
  2. explain why the company does not have a minimum number of self-identified “Diverse” directors

Additionally, at least one director must self-identify as female and another must self-identify as an underrepresented minority, including LGBTQ+.

So far, NYSE has not proposed new disclosure requirements or firm diversity goals for companies listed on its exchange.

Latest Nasdaq Disclosure Guidelines

Nasdaq-listed companies (with certain limited exceptions) must meet the requirement by August 8, 2022, or the date of filing the 2022 proxy, whichever is later. The new diversity matrix disclosure requires meeting the following key criteria:

  1. Updated annually
    • The Board Diversity Matrix must be updated at least once per year, and companies must disclose the data’s effective date
    • After the first year of disclosure, companies must disclose both the current year and the prior year’s diversity statistics
  2. Published ahead of the annual meeting
    • The disclosure may be made ahead of the annual meeting either via (1) proxy statement, information statement, 10-K or 20-F, or (2) on the Company’s website
    • In the case of a website disclosure, the Company must notify Nasdaq of its availability within one business day and complete Section 10 of the Company Event form
  3. Meet a defined board diversity objective
    • Companies need to meet a self-defined board diversity objective that meets Nasdaq’s criteria above or explain their reason for not doing so and potentially outline a plan for meeting the objective
    • Companies have a transition period to meet the objective or explain their reason for not doing so
  4. Director diversity qualifications based on voluntary disclosure and aligned with Nasdaq’s definition
    • Director diversity information must be based on directors’ voluntary self-identification
    • Directors who fall into racial/ethnic categories that are not listed in the Nasdaq definition do not count towards the diverse director objective
    • Directors who fall into more than one acceptable diversity category may be disclosed as such, but the director cannot be counted more than once across categories for the purpose of meeting the diverse director objective

In its February 2022 guidelines, Nasdaq illustrated several acceptable approaches to meeting the diversity disclosure requirement. Nasdaq also offered examples of incorporating supplemental information, such as additional diversity qualifications that companies may choose to highlight. These various methods are outlined below:

Example 1 (Companies with principal executive offices inside the U.S.)
This example shows all required components as well as supplementary information.

Board Diversity Matrix (as of March 14, 2022)

Board Size:

Total Number of Directors

9

Female

Male

Non-Binary

Did not
Disclose Gender

Gender:

Directors

3

6

0

0

Number of Directors who identify in Any of the Categories Below:

African American or Black

0

0

0

0

Alaskan Native or Native American

0

0

0

0

Asian (other than South Asian)

0

1

0

0

South Asian

1

0

0

0

Hispanic or Latinx

0

1

0

0

Native Hawaiian or Pacific Islander

0

0

0

0

White

2

3

0

0

Two or More Races or Ethnicities

0

0

0

0

LGBTQ+

2

Persons with Disabilities

1

Example 2 (Companies with principal executive offices inside the U.S.)
This example shows a company that excludes categories that are not applicable to its directors.

Board Diversity Matrix (as of March 14, 2022)

Female

Male

Total Number of Directors

12

Part I: Gender Identity

Directors

3

9

Part II: Demographic Background

African American or Black

1

3

White

2

6

Example 3 (Companies with principal executive offices inside the U.S.)
This example shows all required categories with additional information related to the company’s directors included below.

Board Diversity Matrix (as of March 14, 2022)

Total Number of Directors

8

Female

Male

Non-Binary

Did Not
Disclose Gender

Part I: Gender Identity

Directors

2

6

0

0

Part II: Demographic Background

African American or Black

0

1

0

0

Alaskan Native or Native American

0

0

0

0

Asian

0

2

0

0

Hispanic or Latinx

0

0

0

0

Native Hawaiian or Pacific Islander

0

0

0

0

White

2

3

0

0

Two or More Races or Ethnicities

0

0

0

0

LGBTQ+

0

Did Not Disclose Demographic Background

0

Directors who are Military Veterans: 1

Directors with Disabilities: 2 

Directors who identify as Middle Eastern: 1

Example 4 (Companies with principal executive offices inside the U.S.)
This example shows an acceptable disclosure with additional narrative detail to complement the matrix.

In addition to gender and demographic diversity, we also recognize the value of other diverse attributes that directors may bring to our Board, including veterans of the U.S. military. We are proud to report that of our eight current directors, three are also military veterans.

Board Diversity Matrix (as of March 14, 2022)

Total Number of Directors

9

 

Female

Male

Non-Binary

Did Not
Disclose Gender

Directors

3

6

Number of Directors who identify in Any of the Categories Below:

African American or Black

1

Alaskan Native or Native American

Asian

Hispanic or Latinx

Native Hawaiian or Pacific Islander

White

3

5

Two or More Races or Ethnicities

LGBTQ+

Did Not Disclose Demographic Background

Example 5 (Foreign Issuers with principal executive offices outside the U.S.)
This example shows acceptable disclosure for foreign companies with supplementary information added below.

Board Diversity Matrix (as of March 14, 2022)

Country of Principal Executive Officer

Canada

Foreign Private Issuer

Yes

Disclosure Prohibited under Home Country Law

No

Total Number of Directors

8

 

Female

Male

Non-Binary

Did Not
Disclose Gender

Part I: Gender Identity

Directors

2

6

0

0

Part II: Demographic Background

Underrepresented Individual in Home Country Jurisdiction

0

LGBTQ+

1

Did Not Disclose Demographic Background

0

Directors who are Aboriginal Peoples: 1

Directors with Disabilities: 2

Example 6 (Foreign Issuers with principal executive offices outside of the U.S.)
This example shows acceptable disclosure for foreign companies where disclosure of race is prohibited in the home country. The company must still disclose gender statistics.

Board Diversity Matrix (as of March 14, 2022)

Country of Principal Executive Officer

France

Foreign Private Issuer

Yes

Disclosure Prohibited under Home Country Law

Yes

Total Number of Directors

8

 

Female

Male

Non-Binary

Did Not
Disclose Gender

Part I: Gender Identity

Directors

3

5

Part II: Demographic Background

Underrepresented Individual in Home Country Jurisdiction

LGBTQ+

Did Not Disclose Demographic Background

Nasdaq also referenced unacceptable disclosures in its latest guidance. It finds that companies that are too vague in their definition of director diversity (e.g., disclosing the number of “diverse” directors without specifying the category of their racial/ethnic or gender identities) do not meet the criteria.

For definitions of diverse identities per Nasdaq’s rules, please see this resource.